by Tom Aguilera
Since 1996, Tom has had a passion for helping investors make sound financial plans and discovering the investments that are right for them. During this difficult time, you may wonder if you’re making the right decisions when it comesto your finances. Whether you’re worried about job security, your investing decisions or having enough emergency savings to weather the storm, here are some tips to help you stay on track.
Streamline Your Budget
Keeping your spending down is a smart way to help build a financial cushion to navigate the unexpected.Focus on separating necessary expenses from the “extras.” Next, work on cutting out nonessentials, such as magazine and game subscriptions, gym memberships and costly entertainment services. Consider an insurance review to see if you can find additional savings on your policies, such as bundling them and taking advantage of any discounts. You can contact SchoolsFirst FCU Insurance Services to help you find savings.1 Review your cellphone plan to see if there are ways to cut back on add-ons you don’t use, such as insurance, and unlimited data and minutes. Discuss your options with your carrier, and if they can’t help you find a solution that fits your needs, consider switching. Many times your carrier will offer incentives to keep your business.
- Keep Adding to Your Emergency Savings
The bigger your emergency fund, the better able you’ll be to overcome financial setbacks. If you’re working, set aside as much as you can. Once you’ve shored up your spending plan, direct any extra money toward your emergency fund. If you haven’t started an emergency fund, choose a set amount to contribute and increase it over time. Make sure you set up automatic deposits into a high-yield savings account, one that’s not connected to your checking account, so you won’t be tempted to spend it. Any time you get a raise or extra funds, increase your contributions.
- Consider Refinancing
With interest rates at historic lows, it could make financial sense to refinance your mortgage or auto loan. If your car payments are up-to-date and you don’t owe more than your vehicle is worth, you may be able to refinance and enjoy a lower monthly payment, particularly if you have good credit. When it comes to refinancing your mortgage, consider your circumstances. If you don’t plan on staying in your home for at least five years, you may not reach the break-even point, which is the time it takes to recover the closing costs on your new home loan. Our Real Estate Loan Consultants can assist you in analyzing the factors and help you decide if it makes sense to refinance your mortgage.2
4. Stick With Your Investing Strategy
When the stock market has a downturn, many investors go into panic mode, selling off parts of their portfolio to avoid temporary drops and then missing potential gains when it bounces back. Keep in mind that historically investing in stocks has provided average annual returns of more than 10%, compared to 6% for corporate bonds,5.5% for Treasury bonds and 3.5% for cash or cash equivalents such as short-term Treasury bonds.3 Keeping a long-term perspective and reviewing your portfolio at least annually are keys to investing success. Your financial advisor 4 can help you rebalance or reallocate your investing mix so it aligns with your goals, risk tolerance and investment timeline.
- Don’t Withdraw Funds From Your Retirement Plan
If you’re experiencing financial hardship, you should only tap the funds in your employer retirement plan — 401(k), 403(b), 457(b), etc. — as a last resort. Withdrawals will likely cause disruptions to a very important future goal, your retirement. Consider using your emergency funds first, and if you can, get a personal loan. Congress has authorized a coronavirus relief package that may help you avoid penalties for taking an early withdrawal from your retirement plan, but you will still have to pay income taxes on any pretax dollars withdrawn, unless you repay the amount within three years. If your hardship is related to the pandemic, you may be able to take a loan and/or extend repayment for an existing loan. But if you’re worried about job security, taking a loan may become an unwanted burden: Your employer plan may require accelerated repayment of the loan if you are no longer employed with them. Please consult with a tax advisor before considering this move.5
We Can Help You Plan For Your Future
Our financial and retirement plan advisors provide complimentary one-on-ones to SchoolsFirst FCU Members and can help find creative financial strategies tailored to your specific needs.4 Visit schoolsfirstfcu.org/advisors to learn more.
- CA Insurance License 0I19344 2. All loans subject to approval. 3.The Reality of Investment Risk Source: FINRA 4. Financial Advisors are registered representatives of CUNA Brokerage Services, Inc. Representatives are registered, securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, which is not an affiliate of the credit union. CBSI is under contract with SchoolsFirst FCU to make securities available to Members. Not NCUA/NCUSIF/FDIC insured, may lose value, no financial institution guarantee. Not a deposit of any financial institution.CUNA Brokerage Services, Inc. is a registered broker/dealer in all fifty states of the United States of America. 5. SFFCU does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative or financial advisor who can help tailor a solution for you.
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